-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WXnrGpE2Rm1YFL2dBwVNRNS3zXevNrC4zAQFu7x3XE7ymVsrFK1UN6XgPUH/Ju6v /kYBzn3WZbhQ5ZtQNMQScw== 0000057187-98-000003.txt : 19980515 0000057187-98-000003.hdr.sgml : 19980515 ACCESSION NUMBER: 0000057187-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LACLEDE STEEL CO /DE/ CENTRAL INDEX KEY: 0000057187 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 430368310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03855 FILM NUMBER: 98620891 BUSINESS ADDRESS: STREET 1: ONE METROPOLITAN SQ STREET 2: 211 N BROADWY CITY: ST LOUIS STATE: MO ZIP: 63102 BUSINESS PHONE: 3144251400 MAIL ADDRESS: STREET 1: ONE METROPOLITAN SQ CITY: ST LOUIS STATE: MO ZIP: 63102 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-3855 LACLEDE STEEL COMPANY (Exact name of Registrant as specified in its charter) Delaware 43-0368310 (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No. One Metropolitan Square, St. Louis, Missouri 63102 (Address of principal executive offices) (Zip code) 314-425-1400 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of April 22, 1998 there were 4,056,140 shares of $.01 par value common stock outstanding. ITEM 1: FINANCIAL STATEMENTS LACLEDE STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Data) Three Months Ended March 31, 1998 1997 Net sales $ 84,555 $ 80,846 Costs and expenses: Cost of products sold 77,638 73,870 Selling, general and administrative expenses 3,818 3,359 Depreciation 1,711 1,942 Interest expense, net 2,678 2,427 Unusual charges (credits) 2,093 (987) Total costs and expenses 87,938 80,611 Earnings (loss) before income taxes (3,383) 235 Provision (credit) for income taxes (1,345) 100 Net earnings (loss) (2,038) 135 Preferred stock dividend requirement (94) (94) Net earnings (loss) available to common $ (2,132) $ 41 shareholders Basic and diluted net earnings (loss) per share $ (0.53) $ 0.01 - 1 - LACLEDE STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (In Thousands) Mar. 31, Dec. 31, 1998 1997 Current Assets: Cash and cash equivalents $ 195 $ 186 Accounts receivable, less allowances 41,849 40,282 Prepaid expenses 1,921 1,238 Inventories: Finished 46,826 45,823 Semi-finished 18,380 18,166 Raw materials 5,793 4,681 Supplies 13,420 14,136 Total inventories 84,419 82,806 Total Current Assets 128,384 124,512 Non-Current Assets: Intangible pension asset 13,909 14,652 Other intangible assets 2,083 2,119 Bond funds in trust 2,385 2,385 Prepaid pension contributions 3,417 5,441 Deferred income taxes 46,652 45,400 Notes receivable -- 3,396 Other 4,584 4,897 Total Non-Current Assets 73,030 78,290 Plant and Equipment, at cost 240,492 239,670 Less - accumulated depreciation 130,134 128,652 Net Plant and Equipment 110,358 111,018 Total Assets $ 311,772 $ 313,820 - 2 - LIABILITIES AND STOCKHOLDERS' EQUITY Mar. 31, Dec. 31, 1998 1997 Current Liabilities: Accounts payable $ 43,018 $ 42,682 Accrued compensation 5,024 6,269 Current portion of long-term debt 2,356 2,356 Accrued costs of pension plans 13,577 13,577 Other 3,061 3,729 Total Current Liabilities 67,036 68,613 Non-Current Liabilities: Accrued costs of pension plans 36,412 36,864 Accrued postretirement medical benefits 75,066 75,864 Other 1,999 2,221 Total Non-Current Liabilities 113,477 114,949 Long-Term Debt: Bank revolving credit 79,967 76,516 Bank term loan 6,993 7,311 Revenue bonds 23,330 23,330 Other 2,000 2,000 Total Long-Term Debt 112,290 109,157 Stockholders' Equity: Preferred stock, no par value, authorized 2,000,000 shares; issued and outstanding 416,667 shares 83 83 Common stock, $0.01 par value, authorized 25,000,000 shares; issued and outstanding 4,056,140 shares 41 41 Capital in excess of par value 59,669 59,763 Accumulated deficit (17,345) (15,307) Minimum pension liability adjustment (23,479) (23,479) Total Stockholders' Equity 18,969 21,101 Total Liabilities and Stockholders' Equity $ 311,772 $ 313,820 - 3 - LACLEDE STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 31, 1998 1997 Cash flows from operating activities: Net earnings (loss) $ (2,038) $ 135 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation 1,711 1,942 Unusual charges (credits) 2,093 (987) Change in deferred income taxes (1,252) 101 Changes in assets and liabilities that provided (used) cash, net of effects from sale of facility: Accounts receivable (1,567) 1,485 Inventories (1,613) 1,273 Accounts payable and accrued expenses (2,596) (365) Accrued pension cost 2,322 2,220 Pension cash funding (2,100) (2,749) Accrued postretirement medical benefits (798) (550) Other assets and liabilities 141 275 Net cash provided by (used in) operating activities(5,697) 2,780 Cash flows from investing activities: Capital expenditures (1,042) 176 Proceeds from sale of equipment 3,625 -- Proceeds from sale of facility -- 9,319 Net cash provided by investing activities 2,583 9,495 Cash flows from financing activities: Net borrowings (repayments) under revolving credit 3,451 (10,916) Payments on long-term debt (318) (1,359) Payment of financing costs (10) (7) Net cash provided by (used in) financing activities 3,123 (12,282) Cash and cash equivalents: Net increase (decrease) during the period 9 (7) At beginning of year 186 143 At end of period $ 195 $ 136 - 4 - LACLEDE STEEL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In Thousands Except Per Share Data) Quarter Year Ended Ended Mar. 31, Dec. 31, 1998 1997 Preferred stock (416,667 shares issued) Beginning balance $ 83 $ 83 Sale of convertible preferred stock -- -- Ending balance 83 83 Common stock - $0.01 par value (4,056,140 shares issued) Beginning balance 41 41 Change in period -- -- Ending balance 41 41 Capital in excess of par value Beginning balance 59,763 60,138 Dividend on convertible preferred stock (94) (375) Ending balance 59,669 59,763 Accumulated deficit Beginning balance (15,307) (12,300) Net loss (2,038) (3,007) Ending balance (17,345) (15,307) Minimum pension liability Beginning balance (23,479) (30,717) Change in period -- 7,238 Ending balance (23,479) (23,479) Total Stockholders' Equity at End of Period $ 18,969 $ 21,101 - - 5 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - GENERAL The accompanying unaudited consolidated financial statements include the accounts of Laclede Steel Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The consolidated financial statements reflect all adjustments (such adjustments are of a normal recurring nature unless otherwise disclosed in these interim financial statements) which are in the opinion of Management necessary for a fair statement of the results for the interim periods. NOTE 2 - UNUSUAL CHARGES (CREDITS) In the first quarter of 1998 the Company recorded non-cash special charges of $2.1 million relating to the retirement of John B. McKinney as President and Chief Executive Officer. These charges increased the net loss for the quarter by $1.3 million of $.31 per share. In February 1997, the Company sold the assets of its electric weld structural and mechanical tubing operation, located in Benwood, West Virginia. Cash proceeds from the sale of these assets, which consist primarily of equipment and inventory, totaled approximately $11.0 million. This transaction resulted in a gain on sale of equipment of $987 thousand ($592 thousand after tax) recorded in February 1997. NOTE 3 - PER SHARE DATA Per share amounts have been calculated based on weighted average shares outstanding of 4,056,140. Net earnings (loss) per share for 1998 and 1997 were computed by dividing the net earnings after deducting preferred dividend requirements of $94 thousand, by the weighted average shares outstanding. The financial results for 1998 are subject to annual audit. - 6 - ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources In the first quarter of 1998 operating activities used $5.7 million in cash. This reflects increases in accounts receivable and inventory totaling $3.2 million, and reductions in accounts payable and accrued expenses of $2.6 million. In January 1998 the Company completed the sale and leaseback transaction for the Ladle Metallurgy Facility at the Alton Plant. This final step of the sale and leaseback transaction provided the company with $3.6 million in cash. Long-term debt increased by $3.1 million in the first quarter of 1998. Net working capital increased by $5.4 million, and the ratio of current assets to current liabilities was 1.9 to 1.0 at March 31, 1998. At March 31, 1998, $80.0 million in borrowings were outstanding under the company's revolving credit facility, with unused availability of $4.0 million. Amounts available under this facility were fully utilized early in the second quarter of 1998 to cover outstanding short-term commitments, primarily trade accounts payable. The Company has periodically amended its Loan and Security Agreement to modify financial covenants relating to operating results and net worth. The most recent amendment was effective March 27, 1998. In the event further amendment to financial covenants is necessary in the future, there can be no assurance that the Company will be able to obtain such amendment. As part of the modifications to the Loan and Security Agreement previously mentioned, in 1997 the Company received the approval of parties to the Solid Waste Revenue Bonds to eliminate certain negative financial covenants contained therein and to substitute therefor certain collateral. Subsequent to that substitution, the only remaining negative financial covenant with respect to the Solid Waste Revenue Bonds is that the Company may not without the prior written consent of the Issuer of the Bonds (i) borrow from its subsidiary, Laclede Chain Manufacturing Company, or (ii) take cash advances from Laclede Chain Manufacturing Company, except to the extent that the aggregate principal amount of all such borrowings and cash advances at any one time do not exceed $7.0 million. Collateral granted to the Trustee of the Solid Waste Revenue Bonds for the benefit of the bondholders consists of (i) all of the issued and outstanding - 7 - shares of Laclede Chain Manufacturing Company and (ii) all of Laclede Chain Manufacturing Company's machinery and equipment now owned or thereafter acquired. As of March 31, 1998, the Company is in compliance with the remaining negative covenant contained in the Solid Waste Revenue Bonds. During 1998 the Company anticipates capital expenditures of approximately $6.0 million, and contributions to pension plans of $13.6 million. Assuming that the Company is able to (i) maintain its existing level of sales, (ii) avoid sales price decreases and (iii) capture savings from productivity improvements, the Company will generate sufficient cash flow to finance its 1998 liquidity requirements including the above referenced expenditures. If the Company is unable to maintain its existing level of sales and current pricing or if the Company's productivity improvements fail to produce positive financial results, the Company may not generate sufficient cash flow to finance its 1998 liquidity requirements. In such event, the Company would evaluate other methods of generating cash flow such as the sale of significant businesses or assets and refinancing transactions. There can be no assurance, however, that any such alternative could be successfully completed. At March 31, 1998 the Company has net deferred tax assets of $46.7 million. Management currently believes that its long-term profitability should ultimately be sufficient to enable it to realize full benefit of future tax deductions. Thus no deferred tax valuation allowance is deemed necessary. The Company will continue to monitor and evaluate its deferred tax assets and the need for a deferred tax valuation allowance. In the event a deferred tax valuation allowance is required in the future, amendment of financial covenants in the Company's Loan and Security Agreement, as well as its Bond Agreements, may be required. There can be no assurance that the Company will be able to obtain such amendments. For a more complete discussion of the Company's deferred tax assets (including issues related to Section 382 of the Internal Revenue Code), see the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Results of Operations Net sales increased by $3.7 million in the first quarter of 1998 compared to the first quarter of 1997. This reflects a 5.8% increase in steel shipments, partially offset by a 1.1% decrease in average sales prices for steel products. - 8 - Cost of products sold increased by 5.1% in the first quarter of 1998, reflecting higher steel shipments. Production costs in 1998 were affected by slightly higher prices for the Company's basic raw material, ferrous scrap. However, increased shipments of semi-finished steel had a favorable effect on average production costs per ton. Selling, general and administrative expenses increased by 13.6% in 1998, primarily as a result of consulting fees paid in connection with Company efforts to improve operations. The increase in interest expenses in the first quarter of 1998 is the result of an increase in bank borrowings. Other non-cash charges in 1998 of $2.1 million relate to the retirement of John B. McKinney, President and Chief Executive Officer. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Management's Discussion and Analysis and other portions of this report on Form 10-Q, contain various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events, including the following: statements regarding the overall demand for steel; statements regarding the ability to maintain sales prices; statements regarding productivity improvement programs; statements regarding the Company's profitability; statements regarding future borrowing capacity; and statements regarding future pension funding requirements. In addition, statements containing expressions such as "believes," "anticipates" or "expects" used in the Company's periodic reports on Forms 10-K, 10-Q and 8-K filed with the SEC are intended to identify forward-looking statements. Forward-looking statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. The Company cautions that these and similar statements included in this report and in previously filed periodic reports including reports filed on Forms 10-K, 10-Q and 8-K and further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statement, including, without limitation, the following: decline in sales prices for steel products; increases in the cost of steel scrap; failure to obtain significant benefits from the Company's cost reduction and productivity improvement programs; increased domestic or foreign steel competition and decreases in the market value of the Company's qualified pension plan assets. - 9 - PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (3)(a) Registrant's Certificate of Incorporation as restated October 28, 1996. (Incorporated by reference to Exhibit (3) in Registrant's Quarterly Report on Form 10-Q for September 30, 1996.) (3)(b) By-laws of Registrant amended December 19, 1997. (Incorporated by reference to Exhibit (3)(b) in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) (4)(a) Registrant's Loan and Security Agreement dated as of September 7, 1994 amended and restated as of August 20, 1997. (Incorporated by reference to Exhibit (4)(a) in Registrant's Quarterly Report on Form 10-Q for September 30, 1997.) (4)(b) First Amendment dated December 30, 1997 to the Company's Restated Loan and Security Agreement. (Incorporated by reference to Exhibit (4)(b) in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) (4)(c) Second Amendment effective March 27, 1998 to the Company's Restated Loan and Security Agreement. (Incorporated by reference to Exhibit (4)(c) in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) Instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under such instruments does not exceed 10% of the total consolidated assets of the Registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon its request. (b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter. - 10 - SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LACLEDE STEEL COMPANY (Registrant) /s/ Michael H. Lane Michael H. Lane Vice President - Finance Treasurer and Secretary Duly Authorized Officer and Principal Financial Officer Date: May 13, 1998 EX-27 2
5 1,000 DEC-31-1997 JAN-1-1997 DEC-31-1997 12-MOS 186 0 42,694 2,412 82,806 124,512 239,670 128,652 313,820 68,613 109,157 0 83 41 20,977 313,820 325,029 325,029 296,230 302,939 13,654 (32) 10,046 (4,950) (1,943) (3,007) 0 0 0 (3,007) (0.83) (0.83)
-----END PRIVACY-ENHANCED MESSAGE-----